Britain is in a deeper recession than economists thought, official figures showed today.

The Office for National Statistics said economic output in the fourth quarter of 2008 was 1.9% lower than in the same period in 2007. It was weaker than the earlier estimate of a 1.8% fall and the worst performance since the second quarter of 1991.

Having been higher before the news, sterling slipped 0.2 cents against the dollar to $1.44 and 0.59 of a cent against the euro to €1.1251. The pound has collapsed against a host of currencies and a leaked document today highlighted EU concerns over the slide against the euro. European finance ministry officials said the "very rapid" drop in sterling "raises questions about the financial stability of the British economy". It said the currency's weakness "is a source of concern for the euro area".

Gordon Brown has argued that the weak currency will boost exports and help the economy but there was little evidence of this today with exports down 5.5% in the final quarter of last year. Household consumption was at its weakest since 1991, manufacturing since 1974, and services since 1979.

The ONS confirmed gross domestic product fell 1.5% in the final three months of last year but revised the third-quarter drop from 0.6% to 0.7%

Markets were also rattled after the head of the Standard & Poor's credit rating agency's sovereign division predicted more downgrades than upgrades of countries' credit ratings.